N.H. House sets up Senate talks on hospital tax

CONCORD, N.H. (AP) — New Hampshire's House approved a plan Wednesday to address a court ruling that found the state's tax on hospitals unconstitutional, setting the stage for negotiations with the Senate over a compromise.

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Posted May. 15, 2014 at 7:12 AM

Posted May. 15, 2014 at 7:12 AM

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CONCORD, N.H. (AP) — New Hampshire's House approved a plan Wednesday to address a court ruling that found the state's tax on hospitals unconstitutional, setting the stage for negotiations with the Senate over a compromise.

The House voted 247-28 to send a plan to the Senate that incorporates two approaches, one to clarify existing law and the other to broaden the tax and lower the rate. The Senate votes Thursday on a rival plan to phase down the tax.

The Senate plan would reduce the tax from 5.5 percent next year to 4.5 percent by 2019. It also would clarify and narrow what is taxed and eliminate the tax on the state's two rehabilitation hospitals.

State Rep. David Hess, R-Hooksett, urged representatives to pass the bill to give House negotiators "more cards to play at the table" when they meet with the Senate to discuss a compromise.

But Rep. Jordan Ulery, R-Hudson, said the entire tax should be dumped because it raises the cost of health care.

The tax produces about $185 million annually for Medicaid and other state spending. The state kept $72 million this year for general state spending, used $82 million for payments to health care providers and returned $31 million to the hospitals to help offset the cost of uncompensated care.

The Senate's proposal would reduce the amount the state keeps in 2016 for general state spending to $17 million and increase the amount paid to hospitals for Medicaid.

The federal government allows states to apply their hospital taxes to 19 categories. New Hampshire applies the tax to two categories: inpatient and outpatient hospital net revenues. The state also taxes nursing homes and intermediate care facilities under a different law.

One alternative under the House's plan would expand the tax to ambulatory surgical center services, therapist services, laboratory and X-ray services in a free-standing lab or X-ray facility and emergency ambulance services. It would lower the tax rate to 5 percent.

In 1991, hospitals began paying the tax so the state could gain matching Medicaid funds to pay for health care for the poor. For many years, they got all their taxes refunded dollar-for-dollar.

In 2011, the federal government said states could no longer refund all the money and, instead, had to apply a formula that reimbursed the funds according to hospitals' Medicaid costs. Three years ago, the Legislature cut Medicaid funding to the hospitals by more than $130 million, but retained the tax. That prompted hospitals to sue.

Last month, a judge ruled the tax on hospitals unconstitutional. The state lost a separate lawsuit over applying the tax to rehabilitation hospitals. The state is appealing the rulings.